You own a portfolio that is 28 percent invested in Stock X, 43 percent in Stock Y, and 29 percent in Stock Z. The expected returns on these three stocks are 9 percent, 12 percent, and 14 percent, respectively. What is the expected return on the portfolio

The answer is 0.1174 or 11.74 %

Explanation:

Solution

Given that:

Stock X = 28%

Stock Y = 43%

Stock Z = 29%

The expected returns for the three stock are = 9%, 12%, 14 %

The next step is to find the portfolio expected return

Thus,

the formula for expected return on the portfolio is given below:

Expected return of portfolio = WxRx + WyRy + WzRz

= (0.28 * 0.09) + (0.43 * 0.12) + (0.29 * 0.14)

=0.0252 + 0.0516 + 0.0406

= 0.1174 or 11.74%